BELGIUM: An Introduction to Private Wealth Law
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Belgium does not have a specific tax regime aimed at attracting high net worth individuals. However, certain features of the Belgian system traditionally were and currently still are particularly attractive to high net worth individuals.
That explains why a relatively high number of foreign (especially Dutch and French) high net worth individuals and families have taken up residence in Belgium.
In the last few years, however, Belgium has significantly increased the tax burden on investment income. The patchwork of tax measures manifests a lack of long-term vision and stability and makes it increasingly difficult to navigate the Belgian tax maze. These challenges are obviously not unique to high net worth individuals, but the size and complexity of their wealth amplify the impact on them.
On the other hand, some of Belgium’s most advantageous tax features still stand today. For example, it is still possible to realise tax-exempt capital gains on privately-held assets, and income tax exemptions exist for yield realised via investment-linked insurance products.
Furthermore, Belgium has no general wealth tax, but levies a 0.15% tax on securities accounts. Stock exchange transactions are also subject to tax, ranging from 0.12% to 1.32% and capped from EUR1,300 to EUR4,000 per transaction.
Moreover, even though gift and inheritance taxes exist, in most cases their effect can be mitigated through proper planning.
High net worth individuals in Belgium struggle with the tension between legitimate privacy concerns and the trend towards ever-increasing transparency. Belgium has set up an Ultimate Beneficial Ownership register and implemented the DAC 6 reporting regime.
In stark contrast with the disjointed state of the Belgian tax system is the recent update of Belgian succession law, matrimonial law, matrimonial property law, property law and company law. The modernisation of the legislation in these key domains offers high net worth individuals residing in Belgium exciting opportunities to organise or reorganise their personal life and affairs, their wealth and the transfer thereof.
Combined with its excellent public health and education system, its central location in the heart of Europe, the fact that it is home to the institutions of the European Union, NATO and Shape and its very extensive double taxation convention network, Belgium remains an attractive location for many high net worth individuals.
The export-oriented Belgian economy has been impacted by the COVID-19 pandemic. In 2020 it suffered a 6.3% drop in Gross Domestic Product. For 2021, an increase of around 4.1% has been predicted. Belgium’s public debt remains relatively high. This is due not only to COVID-19 but also to its complicated state structure. Moreover, the renowned Belgian compromise is increasingly difficult to achieve in a country where the cultural divide has also become an economic and social divide.
By the same token, and despite these challenges, Belgium remains very resilient. This because it is a federal state where important powers lie with the regions. The Flemish Region - Belgium’s economic bulwark - continues to perform especially strongly and seemingly undisturbed by the standstill at the federal level.
It still remains to be seen how the post-COVID-19 relaunch of the Belgian economy will be organised and financed. The EU’s recovery plan for COVID-19 is expected to play an important role.
The Federal Government is currently working on a recovery plan. The regions have already taken a number of initiatives. For example, the Flemish Government has announced that it will set up a fund aimed at supporting future-orientated companies. The Federal Government is preparing a comprehensive tax reform which it hopes to present by the end of 2021. The aim is ambitious: a shift away from taxes on employment towards taxes on consumption, pollution, and wealth. It is also the intention to abolish a number of complicated preferential tax regimes and deductions.
However, it seems prudent not to set expectations too high. The current Federal coalition can best be described as a “disparate grouping” of political parties.
Although Belgium is clearly still trying to cope with some unprecedented challenges, many, if not all, of its European competitors are experiencing similar issues.
Hence there is no reason to expect that Belgium will become relatively less attractive to high net worth individuals when compared to its European neighbours in the foreseeable future.
In this context, it should also not be forgotten that Belgium has numerous non-fiscal features that make it particularly attractive as a home jurisdiction.
However, proper pre-migration planning is a key prerequisite for high net worth individuals who consider migrating to Belgium.
Examples of oddities to be taken into account are the aforementioned Belgian stock exchange tax and the so-called Belgian ‘Cayman tax’.
This is a type of look-through tax that aims to tax Belgian individual taxpayers on income of certain low-taxed companies, foundations, trusts and insurance wrappers (commonly referred to as ‘legal arrangements’) with which they are involved.
The Cayman tax regime is very complex. To make matters worse, to date the Belgian tax authorities have refused to issue guidance on the matter.
This is problematic because - at least in theory - the potential scope of this tax is extremely wide.
Indeed, almost every entity in the world could potentially qualify as a legal arrangement.
This is clearly at odds with the European Freedoms and can also be problematic in a tax treaty context.
Next it should be assessed whether double taxation conventions are available to mitigate double taxation issues (e.g. withholding taxes on interest and dividend income in the source state) and testaments, prenuptial and postnuptial agreements, life insurance contracts, etc., should be reviewed.